Balance of Payments

INTRODUCTION
A statement of a country’s financial transactions and trade with the rest of the world takes place with the rest of the world over a particular time period
SOUTH AFRICA’S BALANCE OF PAYMENTS
It consists of FOUR accounts:
1. The Current Account
• Merchandise - It includes transactions in movable goods that change ownership between S.A. residents and non-residents.
• Net Gold exports - Shows net foreign gold sales + the change in gold of the SARB.
• Services - This includes transportation, travel, financial, insurance, professional, technical, recreational etc. services between South African residents and non-residents.
2. The Capital Transfer Account
- The balance shown reflects the net amount. This amount can be either negative or positive.
The capital transfer account includes: Transactions and grants relating to the ownership of fixed assets and other asset transfers by migrants.
3. The Financial Account
THREE categories in the Financial Account:
• Direct investments:
- Include transactions relating to investments in businesses for the purpose of obtaining a meaningful share (10%+) or control in such a business .
-it includes investment in   and fixed property.
-known as FDI
• Portfolio investments:
- Purchasing or selling   equities (ordinary shares) and debt securities (bonds or gilt-edged shares) that are not part of direct investments.
- These investments are mainly affected through stock exchanges
-Known as Hot Money
• Other investments: - Consist of transactions that cannot be classified as direct investments, portfolio investments or reserves   (4th account of BoP). E.g. trade credits, loans, currency and deposits.
4. Changes in reserves
 The change in net gold and other foreign reserves owing to balance of payments transactions is a balancing amount

• South Africa's reserves are not shown in BoP account because it represents a stock.
• The BoP shows flows only; therefore only changes to gold and... [continues]

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